asked the Chancellor of the Exchequer what will be the cost to the Exchequer resulting from an adverse movement of (a) 5 per cent. and (b) 10 per cent. in the £ sterling-dollar exchange rate on repayment of borrowings by the Government and each of the nationalised industries in each of the next 10 years.

The table below shows figures for the repayment of overseas borrowing by the Government and individual nationalised industries from 1978 to 1987. The figures in the first line for each borrower have been converted to pounds at current exchange rates; those in the second assume a 5 per cent. depreciation of sterling against all other currencies; those in the third assume a 10 per cent. depreciation of sterling. The figures take account of all overseas borrowing up to 31st March 1978. They also take account of all early repayments carried out to date.The method of calculating the figures necessarily involved some rather artificial assumptions. For instance, where a depreciation of the pound against the dollar is assumed, it is necessary to make some assumption about the value of other currencies' rates against the dollar. In this calculation the assumption made is that other currencies' dollar rates re- main unchanged so that sterling depreciates equally against them all. Similarly, it is necessary to make an assumption about the timing of the depreciation of the pound. It has been assumed to happen instantaneously. Neither of these assumptions is likely to match any actual developments.Comparison of the three lines for each borrower shows the difference between the sterling value of debt to be repaid over the next 10 years at current rates and the sterling value, assuming depreciation of the pound. This difference cannot, however, be directly related to any cost to the Exchequer of such depreciation, for several reasons. First, in the case of borrowing by Her Majesty's Government, the foreign currency proceeds are taken into the reserves without being converted into sterling, and, assuming they are retained in the reserves until repaid, there will be no cost to the EEA if sterling depreciates. To this extent, the difference in value after depreciation is merely a book value change.Second, in the case of nationalised industries, around four-fifths of their total outstanding overseas borrowing was drawn under the exchange cover scheme. Under this scheme the exchange equalisation account (EEA) guarantees the nationalised industry foreign currency for payments on overseas loans at a fixed exchange rate. The sterling liability of the nationalised industry is therefore fixed, and the EEA bears any additional cost or benefit deriving from exchange rate movements. However, any such cost may be wholly or partly offset by the charge paid by the industry to the EEA for the use of the scheme for each loan. It is not practicable to calculate the cost or benefit to the EEA resulting from the operation of the exchange cover scheme for each loan; to do so would require arbitrary assumptions about the use of the foreign currency proceeds accruing to the EEA from loans, and about interest payments which it might receive from investment of the proceeds.Third, in the case of nationalised industry borrowing not covered by the exchange cover scheme, the industry bears the additional sterling cost deriving from a depreciation of the pound. The cost to the Exchequer will depend on the individual industry's financial relations with the Government.